Finance ministry worries may scupper India refuelling tankers

The Indian air force's competition to buy six air-to-air refuelling tankers is in danger of collapsing due to "reservations" by the country's finance ministry about the bids.

New Delhi issued a request for proposals in 2007 and received responses from Airbus, with its A330 multi-role transport tanker, and Russia's United Aircraft, with an advanced version of the Ilyushin Il-78 tanker, of which India already operates 12. India had wanted to use the aircraft for refuelling and to transport cargo.

A330 air-to-air refuelling tanker

However, Indian defence minster A K Antony told parliament this week that the finance ministry "has expressed certain reservations relating to the competitiveness of the bids and the reasonableness of the price".

Given that Indian defence procurement procedures require contracts to be signed within two and a half years of the RFP, he adds that "every effort is made to adhere to these time lines".

Antony did not elaborate on the reason for the finance ministry's objections. Industry sources say that the air force favours buying the A330 tankers even though the Il-78 offer was lower. The finance ministry, however, is not convinced that it should choose the A330s and believes that the lower bid should win.

With both sides in a stalemate on the issue, industry sources say that there is little sign that the finance ministry will change its mind about the bids any time soon. With the RFP likely to expire around mid-2010, a fresh competition is likely to be held around the end of 2010.